Botswana Economic Outlook
- The pace of economic growth has slowed reflecting weak demand for mineral exports and a gloomy outlook for the global economy.
- Growth prospects look promising, but the weak pickup in global growth, subdued commodity prices and persistent electricity supply problems pose substantial downside risks.
- The country has experienced a rapid pace of urbanisation which has been associated with some environmental harm and is straining urban areas’ capacity to provide jobs, infrastructure and other essential amenities.
The Botswana economy rebounded in the last five years after a significant setback following the 2008 global economic downturn. However, the country’s pace of economic activity moderated in 2014, reflecting modest growth in mining and persistent electricity and water supply problems. Real gross domestic product (GDP) growth is estimated to have weakened further in 2015 mainly due to subdued demand for mineral exports on account of the gloomy global economy.
Despite this, Botswana’s growth prospects look promising, with real GDP growth projected to pick up slightly in 2016-17. The improvement in growth over the medium term is predicated on the government’s Economic Stimulus Programme (ESP), a gradual recovery in the global diamond market, and increased energy availability following the completion of remedial measures at Morupule B Power Station. The favourable outlook is also underpinned by expected growth in manufacturing following the commission, in 2015, of a steel manufacturing plant and a horticultural processing plant. Downside risks persist from the weak pickup in global economic growth and subdued commodity prices.
In keeping with the government’s fiscal stance targeting a balanced budget, fiscal operations resulted in a budget surplus in FY 2014/15 for the third successive financial year. The government also projected a budget surplus for FY 2015/16. However, government operations during the first half of FY 2015/16 resulted in a fiscal deficit. The deteriorating fiscal situation is on account of a decline in mineral exports receipts. Therefore, Botswana is expected to record a fiscal deficit in FY 2015/16 for the first time in four years.
Inflation continued to fall and breached the lower end of the Bank of Botswana’s mediumterm target range in February, March, September and November 2015. Annual average inflation ended the year in 2015 much lower than in 2014, reflecting lower fuel prices and the government’s commitment to prudent monetary Policy.
Botswana has experienced a high rate of urbanisation, with nearly two-thirds of the country’s total population now living in urban areas. Although rural-urban migration and natural population increase have played a role in urban population increase, the positive trend is mainly due to the reclassification of some villages to urban settlements.